2nd Year, B.A LL.B (Hons), School of Law, UPES, Dehradun.
The concept of GST was first mooted in the year 2000 by the Vajpayee Government. To formulate the modality of the same, the Kelkar Task Force on Fiscal Consolidation was constituted. Under the present NDA Government on the eve of 8th September, 2016 the constitutional 101st amendment act got the presidential assent and the goods and services tax became a reality. And finally, on the midnight of 1st July, 2017 by the President of India was declared to be implemented. The timing of the event was also questioned by the opposition; they viewed this as devaluating the auspicious day that is of the declaration of Independence on the midnight of 15th August 1947.
The constitutional One Hundred and One (Amendment) Acts, 2016 tries to change the tax net upside down, giving both the Centre and the State the power to make laws on GST. The state legislature will have the power to make laws with respect to the intra-state trade and commerce while the parliament wills specific powers to make laws with respect to inter-state trade and commerce, as has been provided under the newly inserted Article 246A. To avoid any conflict of the legislative powers of Centre and state, the residuary power of legislation under Article 248 is made subject to the newly inserted Article 246. In the same pursuit, both the state list and the Union list stand amended to give effect to the substantial GST provisions with respect to legislate.
The newly inserted Article 269A provide that though the levy and collection of tax on inter-state trade and commerce is to be done by the parliament, but the same would be shared by the center and state as per the guidelines and recommendations of the GST Council.
Article 279A has been added to constitute the all-powerful GST Council, so to say a supra-federal body to oversee the functioning, implementation and smooth running of the GST. Article 279A provides for the council to be headed by a chairperson, the Union Minister for Finance, Union Minister of State in charge of Revenue or Finance as member and a Minister in charge of Finance or Taxation or any other minister as nominated by each state government as member.
Article 250 which provides for emergency power of the parliament to legislate with respect to the entries in state list post the proclamation of emergency, stands amended to make provision for the parliament to make laws with respect to GST in a state of emergency.
Similarly, Article 268 has been amended to the extent that excise duty on medicinal & toilet preparation will be omitted from the state list and added to the union list. Further Article 268A, that provides for implementation of service tax, stands repealed as from now the service tax is subsumed in GST. Article 271 has been amended to prevent the imposition of surcharge on commodities/services that have been brought within the ambit of GST.
In light of the Constitutional 101st Amendment, the Union of India is obligated to enact legislations with respect to integrated goods and service tax (IGST) and Central Goods and services tax (CGST); whereas the state have to legislate with respect to state goods and services tax (SGST).
GST and Centre-State Relations
The new GST regime sought to be ushered, heralds a tectonic shift in centre-state relations. By unifying the system of indirect taxation, it has lead to an apprehension in some quarters that the new taxation regime will undermine the federal structure of governance. A number of state governments have raised their concerns and apprehensions about the impact of the GST system on federalism and the autonomy of states. These include:
1. State losing legislative sovereignty on taxation which is an assault on federalism and will lead leads to states not being able to have their own fiscal policies according to their individual welfare needs.
2. Manufacturing states, like Tamil Nadu apprehend that they are going to permanently lose more than 9,000 corers annually because of destination based taxes.
3. Union Government having veto power in the GST council.
4. Regardless of the size of their economies, all states to have a uniform distribution of vote share which is unfair to economically advanced state.
5. States are not empowered to levy higher taxes over and above SGST on tobacco and tobacco products.
The most important and crucial objection is with respect to the GST council as established under the Amendment Act, 2016, which will be a Supra-Federal Statutory Body that will completely oversee the GST regime including rate of GST, entities to be taxed, purview & ambit and also settle the disputes between centre and state/s and between the states. The council is having two members as representatives of the central government, one of whom the union finance minister shall be the chairperson, whereas each state will only have one representative. The nature of the overwhelming powers of the council may have a far reaching effect and even amount to undermining the legislative sovereignty of both centre and state.
With only one representative in the council, member states will not have adequate say in these matters. The council’s decisions, if detrimental, cannot be undone by the states and the states will accordingly have to compromise on their budgets and the entire fiscal policies. The voting structure of the council is such that the states only have one vote each, whereas the canter has an effective veto. Therefore, it will not be out of place to say that council might act as an instrument for the backdoor entry of the central government into the decision and policy making sphere of a duly elected state government.
 Section 2 of the Constitutional One Hundred and One (Amendment) Act, 2016.
 Section 17 of the Constitution One Hundred and One (Amendment) Act, 2016.
 Section 9 of the Constitution One Hundred and One (Amendment) Act, 2016.
 Section 11 of the Constitution One Hundred and One (Amendment) Act, 2016.
Compiled by GSTstreet for #GSTManthan